Friday, February 29, 2008

Dell is seeing softness in the PC market overall. Their consumer business is a very large portion of mix in Q4. Price pressure in consumer, though somewhat offset by lower DRAM costs, caused them to have negative operating margins in what is 50% of their business in the seasonally strong Q4.

I didn't mean to say that lack of flat panels drove the miss. It contributed to it. What I mean is that Dell has relied on selling third party, big ticket items to drive the top line and they haven't been able to add anything with real meat to it. They're gigantic at this point -- a 60 bil/year company. It's hard to juice revenues at this point. Their domestic market business growth period is probably done ex standard economic growth. All the expansion has to come from international arenas. If the global economy slows, which markets are suggesting, the only thing they'll be able to do is control costs.

And wouldn't you know it, that was the focus of the guidance and the call -- cost controls. I still think normal seasonality is going to get you below reduced analyst expectations and that the stock is vulnerable near-term.